By Georgi Kantchev
Oil prices slid on Wednesday on reports of another surge in U.S.
oil supplies while major banks continued to slash their price
forecasts for this year.
Barclays and Credit Suisse lowered their estimates, seeing
little respite for crude prices which have shed more than 55% since
a peak in June.
Front-month WTI futures dropped $1.08, or 2.3%, to $45.15 a
barrel on the New York Mercantile Exchange. Brent crude for March
delivery traded down 56 cents, or 1.1%, at $49.04 a barrel on
London's ICE Futures exchange.
The American Petroleum Institute reported late Tuesday that
weekly U.S. oil inventories rose by 12.7 million barrels. The U.S.
Energy Department will report its widely-watched inventory data
Wednesday at 10:30 a.m. EST, and analysts polled by The Wall Street
Journal forecast a 4-million-barrel increase.
Oil production in the U.S. has surged in recent years on the
back of a shale boom that has added to the global oversupply and
pushed oil prices to their lowest level in more than 5 1/2
years.
Traders are anticipating growth in inventories at the key
storage hub of Cushing, Okla., for months to come, said Andy Lipow,
president of Lipow Oil Associates, a Houston consulting firm.
Regional production is rising, the refineries producers can sell to
are going into maintenance outages and futures prices are
encouraging everyone to put oil in storage now, all bearish for
near-term futures, he said.
"No one can actually pick the bottom," Mr. Lipow said.
On Wednesday, Barclays slashed its oil price forecasts for this
year by around 40%, saying it expects a long period of oversupply
stretching at least into early 2016. The bank cut its average price
estimate for Brent to $44 a barrel from $72 and for WTI to $42 a
barrel from $66. "We expect to see further downside to prices in
the next few months, with both contracts likely to trade into the
high $30s before the oil price decline is arrested," Barclays
said.
Credit Suisse also cut its average price forecast for Brent this
year to $58 a barrel from $75.25, saying oil prices could recover
by the end of the year.
"There is a much greater degree of uncertainty in the dynamics
that will shape the physical crude demand-supply balance and crude
pricing than we have seen in recent history," said David Hewitt,
managing director and co-head of oil research at Credit Suisse.
Investors will watch the U.S. Federal Open Market Committee's
statement later Wednesday for signs of how monetary policy might
affect the dollar.
The greenback's rally in recent months has further weighed on
dollar-denominated commodities such as oil as they become more
expensive for holders of foreign currencies.
Nymex reformulated gasoline blendstock for February--the
benchmark gasoline contract--rose 1% to $1.3630 a gallon. February
diesel lost 2.93 cents, or 1.8%, to $1.6335 a gallon.
Timothy Puko and Eric Yep contributed to this article.
Write to Georgi Kantchev at georgi.kantchev@wsj.com
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